Technology

JPMorgan Raises Price Targets on FANG Stocks in a Big Way

Lee Jackson

Published: September 28, 2016 8:25 am

Last Updated: January 13, 2020 3:04 am

What was super-big in 2015, the so-called FANG stocks, took a dive to start this year, and as is inevitable, the perma-bears on Wall Street took to the airwaves and more to say the end was near. Well that didn’t last long, and the group of four large cap tech stocks — Facebook, Amazon, Netflix and Google — have roared back and are doing extremely well.

In a new research report on internet stocks, the analysts at JPMorgan make the case that owning these market leaders still makes sense despite in some cases almost meteoric rises from the lows in early February. They are bullish enough that they raise their price target on each stock in the group, and some are pushed much higher. All of the companies are rated Overweight at J.P. Morgan.

Alphabet

The search giant continues to expand and is even working on a driverless car now. Alphabet Inc. (NASDAQ: GOOGL) provides online advertising services in the United States, the United Kingdom and rest of the world. It offers performance and brand advertising services, and it operates through Google and Other Bets segments. The Google segment includes principal internet products, such as Search, Ads, Commerce, Maps, YouTube, Apps, Cloud, Android, Chrome and Google Play, as well as technical infrastructure and newer efforts, such as virtual reality.

The Google segment also sells hardware products, comprising Chromecast, Chromebooks and Nexus. The Other Bets segment includes businesses such as Access/Google Fiber, Calico, Nest, Verily, GV, Google Capital, X and other initiatives.

Top Wall Street analysts point out the company reported better than expected second-quarter results with the best top-line growth since the third quarter of 2014. Paid clicks came in above Wall Street estimates, growing 29%, while Google websites paid click growth was 37% with YouTube and mobile accounting for much of this strength. EBIT margins also continued to see outstanding growth at 39%, versus less than 38% in the same period last year.

JPMorgan raised its price target to $1,025 from $950, and the consensus target is $940.15. The shares closed Tuesday at $810.73.

Amazon

This company is the absolute leader in online retail and a dominate player in cloud storage business. Amazon.com Inc. (NASDAQ: AMZN) serves consumers through retail websites that primarily include merchandise and content purchased for resale from vendors and those offered by third-party sellers. In addition, the company serves developers and enterprises through Amazon Web Services (AWS), which provides compute, storage, database, analytics, applications and deployment services that enable virtually various businesses.

AWS is the undisputed leader in the cloud now, and many top analysts team see the company expanding and moving up the enterprise information value chain and targeting a larger total addressable market. The company has had numerous recent product announcements, including Aurora for relational database engine, Quick Sight for business intelligence and AWS Database Migration Support Service.

Amazon reported a very strong quarter with good revenue and unit growth acceleration. Top Wall Street analysts note that net sales rose 31% year over year, and while forward guidance was somewhat mixed, the firm thinks it reflects normal seasonal operating spending conditions as the company prepares for the holiday season, which is busier every year. The sales guidance was better than expected, but the GAAP operating income came in lower. Analysts also see Amazon opening 18 new fulfillment centers in the third quarter alone, versus just six in last year’s third quarter.

The JPMorgan price target for the stock was raised to $1,000 a share from $925. The Wall Street consensus price objective is $881.70. Shares closed Tuesday at $816.11.

Facebook

The huge social media leader has posted gigantic quarterly numbers that truly blew most of Wall Street away. Facebook Inc. (NASDAQ: FB) operates as a mobile application and website that enables people to connect, share, discover and communicate each other on mobile devices and personal computers worldwide.

Its solutions also include Instagram, a mobile application that enables people to take photos or videos, customize them with filter effects, and share them with friends and followers in a photo feed or send them directly to friends; Messenger, a messaging application for mobile and web on various platforms and devices, which enable people to reach others instantly, as well as enable businesses to engage with customers; and WhatsApp Messenger, a mobile messaging application.

Facebook also develops Oculus VR technology and content platform, which allows people to enter an immersive and interactive environment to play games, consume content and connect with others.

As of December 31, 2015, Facebook had 1.04 billion daily active users (DAUs) and 934 million DAUs who accessed Facebook from a mobile device. Most Wall Street analysts point to the fact that Facebook remains the top beneficiary of the adoption of mobile internet trends with total U.S. internet time spent on Facebook and Messenger.

Top Wall Street analysts feel that Facebook’s long-term forecasts are more easily attainable, especially as the company continues to grow and employ new platforms for online advertising. It should be noted that Facebook had grown to an astounding $369.91 billion market cap in less than five years.

The JPMorgan price objective was raised to $175 from $170. The consensus price target is $155.57. Shares closed Tuesday at $128.69.

Netflix

This Wall Street darling also has been battered and is down over 25% from highs printed last December but could offer solid upside. Netflix Inc. (NASDAQ: NFLX) is the world’s leading internet television network, with more than 70 million members in over 190 countries enjoying more than 125 million hours of TV shows and movies per day, including original series, documentaries and feature films. Members can watch as much as they want, anytime, anywhere, on nearly any internet-connected screen. Members can play, pause and resume watching, all without commercials or commitments.

Netflix is available on virtually any device with an internet connection, including personal computers, tablets, smartphones, smart TVs and game consoles, and it automatically provides the best possible streaming quality based on available bandwidth. Many titles, including Netflix original series and films, are available in high-definition with Dolby Digital Plus 5.1 surround sound and some in Ultra HD 4K. Advanced recommendation technologies with up to five user profiles help members discover entertainment they’ll love.

The $116 JPMorgan price target was raised to $125. The consensus price objective is posted at $104.14. The stock closed on Tuesday at $97.07.

There is often safety in buying the biggest companies, and the JPMorgan enthusiasm for these stocks is well founded. Given the big gains in the stocks since the February lows, investors may want to buy partial positions here and look for a market pullback.